The thing that everyone always misses in these conversations is that screens over buttons is a cost cutting measure, not a first-principles design decision.
It means the UI can be designed and developed mostly independently of the physical controls, which helps reduce rework. I also expect it reduces costs for manufacture and assembly.
I’m in favour of more physical controls, but it surprises me that this rarely comes up. I suppose “people are idiots” is a more appealing explanation.
It's even more in regards to production planning. Building the production pipeline takes long and is inflexible as you need to ensure to pick suppliers which will provide spare parts for a sensible price for the whole lifecycle. Thus you limit capabilities very early in the design cycle.
A software based solution you can finalize last minute and with later updates add extra features. Thus if a competitor provides a feature you don't have to wait years for the next new design, but can deliver based on software development priorities any time, to any series you like (even add after delivery)
Somehow, the Dacia Sandero has physical controls for climate control and physical buttons on the steering wheel. It manages to do that whilst being one of the cheapest cars you can buy.
I'm not convinced it is that easy.
Cars traditionally have very generic button clusters, like [0]. It is even very common to have dummy buttons in there. Combine that with today's cars where those buttons are hooked up to some MCU to send a CAN message instead of being hardwired to a function-specific cable in a giant loom, and it is suddenly quite easy to change button functionality quite late in the design process for basically zero cost: you just need a slightly different label print and a small firmware patch!
Or, if you want to be 100% flexible, go with the ATM approach where physical buttons are placed next to an icon shown on a screen[1]. All of the flexibility and all of the tactile feedback! You can even go for a multi-level layout, with a top row of mode selection buttons, a bottom row of mode-specific function buttons, and perhaps even a big fat dial with haptic feedback[2]. Or even go all-out Elgato Stream Deck[3].
And sure, the fact that slapping in a giant touchscreen lets them decouple UX design from physical controls is going to play a big role. But it is by far the laziest and least user-friendly way of doing so. If that's the best you can come up with, you probably shouldn't be doing UX design at all.
[0]: https://www.classiccarstodayonline.com/wp-content/uploads/20...
[1]: https://media.istockphoto.com/id/672002868/vector/atm-machin...
[2]: https://www.youtube.com/watch?v=ip641WmY4pA
[3]: https://1.img-dpreview.com/files/p/E~TS940x788~articles/8521...